Congress to Consider Raising the Federal Minimum Wage
to $15 by 2020

The national movement behind increasing minimum
wages comes after several cities such as San Francisco, Los Angeles, and Seattle
already started down a path toward a $15.00 per hour minimum wage.

This article was published in the July 27, 2015,
issue of The National Law Review.

Humor me for a second. Imagine you are an employee
earning either an annual salary or an hourly wage. You are in the middle of your
year-end review with your supervisor(s). You sit down and discuss fun things
like strengths, weaknesses, travel destinations and perhaps the company holiday
party. Then it comes time to discuss your potential salary increase, not only
for next year, but for the next five years of your employment. Your supervisors
propose to increase your salary approximately 24% this year and provide an
annual increase somewhere between 11% to 17% for the next five years thereafter
in order to provide you with a total wage increase of approximately 110% of your
current annual salary.

Impossible, right?

Not impossible for the
approximately 3 million American workers who earned hourly wages at or below[1]
the federal minimum wage last year. Last week, presidential candidate and
Senator Bernie Sanders of Vermont announced a bill to pass the
Pay Workers a Living Act. The bill, which is co-sponsored by Senator Edward
Markey of Massachusetts, proposes to gradually increase the current federal
minimum wage of $7.25 over the course of the next five years until the minimum
wage settles in at $15.00 per hour in 2020. The first annual increase will come
in 2016, raising the minimum wage to $9.00 per hour. Thereafter, the minimum
wage will be increased each year until 2020 by an additional $1.50 per hour. A
similar bill was also recently referred to the U.S. House of Representatives’
Committee on Education and the Workforce by Representatives Raul Grijalva of
Arizona and Keith Ellison of Minnesota.

According to a
tweet by the Sanders camp, “the current federal minimum wage is a
starvation wage.” According a
fact sheet in support of the bill provided by Senators Sanders and Ellison,
around 54 million U.S. workers currently make less than $15 per hour, and almost
half of these workers are age 35 or older. The
fact sheet opines “[n]o one working full time should be in poverty. It is
time to pay workers a living wage of at least $15 an hour.”

By this author’s calculation, there has never been an
increase of this significance over a five-year period since the federal minimum
wage was
first passed in 1938. The highest percentage adjustment to the federal
minimum wage appears to have been from 1949 to 1950 when the minimum wage
increased approximately 88% from $.40 to $.75 per hour. The next highest
increase in terms of percentage appears to have been an nearly 66% increase from
the 1973 minimum wage of $1.60 per hour to $2.65 in 1978. The super-majority
other increases over five-year periods appear to be less than 33%. The
fact sheet supports the need for such a significant increase in such a
short time by explaining, “[i]f the minimum wage had been raised since 1968 at
the same rate as inflation and productivity – i.e., the rate at which the
average worker produces income for the employer – it would be more than $26 per
hour.”

An astounding 47% of those earning the federal minimum
wage are purportedly working for the fast food industry. The fact sheet cites a
study conducted by the University of Massachusetts-Amherst that “concluded
an increase to a $15 minimum wage could be fully absorbed by [fast food
industry] employers without resorting to cuts in employment levels, lowering the
average profit rate, or reallocating funds from other areas of operation.” To
reach this conclusion, the study assumes that the increase in labor costs will
necessarily “increase workers’ commitment to their job” thereby resulting in
lower turnover rates and savings “on the costs of recruiting and training new
employees…” The study also acknowledges that one way for employers to “cover a
share of their increased [labor] costs [is] by raising prices.” However, the
“elephant in the room” only summarily addressed by the study is to what extent
the cost of higher wages will simply be reallocated to the consumer. No specific
answer is provided – by the fact sheet or the study - regarding the extent of
the price increase. Therefore, Joe and Debbie consumer who enjoy their fast-food
burritos, burgers, and footlongs can almost certainly expect to share a portion
of the increased labor bill that could come with the passage of the Pay Workers
a Living Act. The precise amount of the cost on the other hand remains to be
determined.

The national movement behind increasing minimum wages
comes after several cities such as San Francisco, Los Angeles, and Seattle
already started down a path toward a $15.00 per hour minimum wage. Last week,
the New York Wage Board appointed by Governor Andrew Cuomo announced it would
finalize its recommendation to the state’s labor commissioner to pass
legislation moving the minimum wage up to $15.00 as well. Another Governor in
the minimum wage debate spotlight is Governor Jerry Brown of California who
signed into law minimum wage increases in California that will result in a
$10.00 per hour California minimum wage by January 1, 2016. However, after two
of California’s leading cities implemented a plan to increase minimum wage as
above, public pressure remains on Governor Brown Los Angeles and San Francisco
and implement a state-wide increase to the $15.00 per hour number.

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